2013: a year of readjustment and renewing commitments to sustainable growth for SEE
Hilary Walsh, Economy, Finance and Trade Manager at Euromonitor International
The global economic slowdown of 2012 was far sharper than expected and its impact on the economies of Southeast Europe turned the spotlight on the region’s structural weaknesses whilst also exacerbating the effects of the eurozone debt crisis.
For these economies, 2013 is a year of readjustment and renewing commitments to creating robust and sustainable economic growth, an approach which is forecast to result in more promising rates of real output in 2014. Moldova, Turkey, Kosovo, Macedonia, Serbia, Albania, Romania, Montenegro, Bulgaria, Bosnia and Herzegovina, Croatia, Slovenia and Greece make up the key SEE economies. Five of these are already EU members, while “the Balkan 6” (Serbia, Albania, Kosovo, Macedonia, Montenegro and Bosnia-Herzegovina) and Turkey, are in the candidate process for membership;
The residual effects of the eurozone debt crisis are the key downside risks that these countries are exposed to. However, structural issues such as high unemployment rates, unsustainable public debt and deficit levels, weak business environments and poor consumer confidence levels are also hindering overall macroeconomic prospects in Southeast Europe;
Average regional growth in SEE or “emerging Europe” is expected to increase from -0.6% in 2012 to 1.0% real GDP growth in 2013 before growing by 2.3% in 2014;
In this group, it is the EU members who are the worst affected, countries such as Croatia, Greece and Slovenia still struggling with deep recessions, unstable financial systems and lack of privatisation dragging on potential investment levels;
By 2020, the regional average real GDP growth of Southeast Europe will be 3.5%, up from just 1.0% in 2013, while the EU average in 2020 will still be just 1.9%.
Real GDP growth in selected SEE economies 2012-2014 Average regional growth in Southeast Europe is expected to increase from -0.6% in 2012 to 1.0% real GDP growth in 2013 before growing by 2.3% in 2014. While these growth rates pale in significance when compared to the growth rates seen in Asia-Pacific and Africa and the Middle East, emerging Europe’s main competitors, the increase in output growth forecast between 2012 and 2014 says a lot about the overall prospects for the region in the long term.
Moldova is forecast to be the fastest growing economy in SEE in 2013 and the third fastest growing in 2014, with 4.0% real GDP growth expected both years. The economy contracted in 2012 thanks to a prolonged drought which impacted key agricultural exports but these have since rebounded healthily with remittances and industrial activity also boosted. Inflation in the country also slowed from 7.7% in 2011 to 4.7% in 2012 and an estimated 4.6% price growth is expected in 2013 which will continue to take the pressure off consumers’ real incomes, hence fuelling consumer expenditure which is forecast to grow by 4.8% in Moldova in real terms in 2013, the biggest increase in consumption in the region;
In 2014, Turkey is expected to be the fastest growing economy in Southeast Europe, as well as the entire European region. Despite this the country is still struggling with unemployment and constrained capacity. Turkey is a highly open economy but this creates vulnerabilities in terms of weak demand from external markets and capital outflows which have been an ongoing issue since the global financial crisis of 2008-2009 and were made worse by the eurozone debt crisis. FDI inflows shrank by 23.9% in US dollar terms in 2012 but this should reverse in 2014 at least, if not sooner;
Kosovo is expected to grow by 2.9% in real terms in 2013 before expanding by a further 4.3% in 2014. Kosovo has proven to be one of the most resilient economies in Southeast Europe since 2008, with real GDP growth averaging 3.4% a year in real terms. One of the “Balkan 6”, the next group of countries hoping to accede to the